Participation of customers on the co-creation of Service Climate in the hotel industry
A case study of Frogner House Hotel Norum
Author: Arjun Kumar Shrestha (998163, Candidate no. 9) Supervisor: Prof. Dominique Thon
BE309E
Student
Bodø Graduate School of Business Spring semester 2014
Master thesis, MBA 2 years, 30 hp
Bodø, May 20, 2014
1 Acknowledgements
I would like to thank all those who made it possible for me to complete this thesis. I want to address a special thanks to my supervisor Prof. Dominique Thon for his invaluable support and guidance in making my effort successful. Similarly, my sincere thanks go to entire employee team of Frogner House Hotel Norum as well as all the customers (international guests) for taking time to participate in the interview despite their busy schedule.
I would also like to express my deepest gratitude to all of my friends for constant support and encouragement they have provided me throughout this period. Without the support of Vumee Shrestha (Nataki), Sandeep Sapkota, Anup Paudel and Utsav Sinnya, it would have been impossible for me to complete my research within the deadline. I am truly lucky to have friends like these in my life.
Last but not least, I would like to dedicate this thesis to my father, mother, and brother who have stood by me in the hardest of times and have provided me with unconditional love and support in each and every step of my life.
2 Abstract
Based on the large volume of current literatures, the benefits of customer co-creation of value in the service delivery process have been well established. However, little research has been done to investigate the role of customers and their influence in co-creating the service climate within organizations although there has been an increase in the awareness of the importance of customer behaviours in the service delivery process. This paper showed the importance of customer behaviours on the perceptions of employees towards the service climate of the hotel firms.
The main purpose of this thesis is to understand the role of customers in co-creating the service climates inside hotel firms where co-creation of services occurs. For empirical study, I have used the semi-structured interviews for data collection from eight respondents, particularly five customers (international guests) and three employees. All the respondents are from Frogner House Hotel Norum (located in the Oslo city, Norway) since this is exploratory case study of this hotel. The most significant implication that has emerged from the study is that customers’
participative and citizenship behaviours such as giving feedbacks, employees’ job appreciation and praise during direct interactions, advocacy through word of mouth, and sharing of knowledge and seeking of information that could benefit the firm, influenced employees’
perception of their work climate. Although our findings showed that some customers shared more and l ess information with employees and other customers inside the hotel. This could be because of the different cultural background of the customer respondents. One obvious conclusion is that the degree of participation of the international guests is influenced by cultural difference. And, more importantly, this obvious fact leads to the results that employees transfer these positive attitudes to their fellow employees through affective group tone through which the overall working climate within hotels is improved.
Finally, this research concludes that customers’ contribution to the creation of service climates inside hotel firms is directly correlated to the extent of their interaction with employees of the service firm. I believe that theoretical and practical implications of the findings from this research will be helpful for the future research since the findings from this study have increased the understanding of the role of customers in the co-creation service climates within hotel organizations.
3 Keywords: Service climate, Value co-creation, Service-dominant logic, Social interaction, Customer Experiences and drivers of experiences, Influence of customer behaviours in co- creation of service delivery, Cultural differences, Cultural Intelligence, Transactional Cultural
List of Abbreviations
OCB Organizational Citizenship Behavior
SDL Service Dominant Logic
HR Human Resource
S-D Service-Dominant
G-D Goods-Dominant
FSE Frontline Service Employee
4 Table of Contents
1. Introduction ... 6
1.1 Background ... 6
1.2Problem discussion ... 8
1.3 Purpose of the Study ... 12
1.4 Research Question ... 12
1.5 Limitation ... 12
1.6 Structure of the Thesis ... 13
2 Theoretical Framework and a Literature Review ... 15
2.1. Service Quality ... 15
2.2. Service climate ... 16
2.3 Service Oriented Organizational Citizenship Behaviour (OCB) ... 17
2.4 Value Co creation in service logic ... 17
2.5 Social Construction Approach ... 18
2.6 Interaction Concept ... 19
2.7 Drivers of customer experiences ... 19
2.8 Customer value co creation behaviour ... 20
2.8.1 Dimensions of customer participation behaviour ... 21
2.8.2 Dimensions of customer citizenship behaviour ... 22
2.8.3 Customer behaviours’ effect in co-created service delivery ... 23
2.9 A Business Culture ... 23
2.9.1 Learning about cultures ... 24
2.9.3 Trompenaars seven dimensions of culture ... 25
2.9.4 Geert Hofstede’s five cultural dimensions ... 26
2.9.5 Cultural intelligence And Transactional culture ... 27
2.9.6 Communication in High context and Low context cultures ... 28
2.10 A Chapter Summary ... 29
3. Methodology ... 33
3.1 Choice of topic ... 33
3.2 Preconception ... 34
3.3 Research Philosophy ... 35
3.4 Research Approach ... 38
3.5 Research Strategy ... 38
3.5.1 A Case Study ... 40
3.6 Research Design ... 40
3.7 Literature Search ... 41
3.8 Data collection methods ... 42
3.8.1 Selection of Respondents ... 43
Table 3: Overview of respondents ... 45
3.9 Approach to analysis ... 45
3.10 Quality Criteria ... 46
3.10.1 Trustworthiness ... 46
3.10.2 Authenticity ... 47
3.11 Ethical considerations ... 48
3.12 Chapter Summary ... 49
4. Empirical Chapter ... 50
5
4.1. Frogner House Hotel Norum ... 50
4.2 Customer’s Point of view ... 51
4.2.1 Customer A ... 51
4.2.2 Customer B ... 56
4.2.3 Customer C ... 60
4.2.4 Customer D... 63
4.2.5 Customer E ... 66
4.3 Employee’s point of view ... 69
4.3.1 Employee A ... 69
4.3.2 Employee B ... 72
4.3.3 Employee C ... 75
4.4 Chapter Summary ... 78
5. Discussion and Analysis... 80
5.1 Service Environment ... 80
5.2 Social Interaction ... 83
5.3 Employee Empowerment ... 85
5.4 Customer participation and citizenship behaviour ... 87
5.5. Cultural difference ... 89
5.6 Cultural intelligence And Transactional culture ... 91
5.7 Communication in High context and Low context culture ... 91
5.8 Chapter Summary ... 93
6. Conclusion ... 94
6.1 Final Conclusion ... 94
6.2 Contribution of the study ... 96
6.2.1 Theoretical Contributions ... 96
6.2.2 Practical implications ... 96
6.4 Further Research ... 97
List of References: ... 98
Appendix 1: Interview Guide for Customers (International guests) ... 110
Customer’s Questionnaire ... 110
Appendix 2: Interview Guide for Employees ... 113
Employee’s Questionnaire ... 113
6 1. Introduction
This chapter describes the background of the study, which is followed by the problem discussion and from the identified research gap trying to pose the research question. Explaining the research purpose of the study concludes the chapter. In this chapter, the limitations of this paper and definition of key concepts are also presented. At the end, structure of thesis is given.
1.1 Background
In today’s contemporary changing business environment, the big challenge is to provide a superior service quality that can be achieve through an adequate and a strong focus on customer.
By doing so, firms can gain the long lasting competitive advantage in winning the market (Chiara G., 2007). The writer R. Ladhari (2011) argue that marketers are trying to focus more on a continuous monitoring and evaluation of service quality to achieve competitive advantage.
This involves various innovative offerings and service developments, which have a direct influence on customers’ service experiences. Because it is very obvious that better service quality increases perceived service value and satisfaction which ultimately improves the service provider's customer retention and financial performance; and also enhances a firm's corporate image (Nguyen and Leblanc, 1998). This means that providing a quality service is about meeting the optimum company’s capability and excelling customer’s expectation.
According to Grönroos, (1994) service is the process which involves mostly a series of intangible activities that occurs through interactions between the customer and service employees where the physical resources (goods) and/or systems of the service provider become as solutions to the customer’s problems. Likewise, service quality is the difference between customers’ expectations for service performance prior to the service encounter and their perceptions of the service received (Patrick P. et. al, 1996). The theory of service quality predict that if performance does not meet their expectations then service quality is low and if performance exceeds expectation then service quality is said to be high. Grönroos, (1984) suggests two types of service quality; namely; technical quality (what the customer is actually receiving from the service) and functional quality (the manner in which the service is delivered).
The role of service climate of an organization is increasingly develop in the research area since the past thirty years. In relation to the customer satisfaction (Johnson, 1996) and service quality (Schneider et al., 1998) there is a large volume of published studies which describes the role of
7 organizational climate in service organizations by encompassing the employees’ perceptions into the process. Even more importantly, this area of research has been of interest to many scholars in the service marketing field and is considered as an important element for the successful service delivery of quality service to the customers resulting in increased customer satisfaction.
In order to understand what ‘climate’ means in an organizational context, Schneider, Ehrhart, and Macey (2011) defines the climate of any setting as “the overall sense or meaning that people construe from the patterns of their individual experiences and behaviours which they observe in their social settings” (cited in Bowen & Schneider, 2013:2). This implies that the climate of that setting defines the perceptions of people about what they experience from the social setting in which they are. Furthermore, in a service setting where service is the main theme, service climate refers to the collective sense of shared perceptions of people who are involved with the service organization whose motive is to provide service excellence backed up by policies and practices that encourages and emphasizes service behaviours by recognizing and rewarding such behaviours (Schneider, White, and Paul 1998). In similar way, service climate refers as the overall emphasis of the service organization in delivering excellent service and treating its employees’ rightly and creating a favourable environment for them to become motivated towards that goal. When organizations initiate practices and policies that enhance service excellence, employees feel what is expected of them from the organization and strive to work towards that goal. Thus, the different experiences that employees encounter inside the organization from the various events and activities within that organization creates a belief among the employees about what their organization wants and expects from them. This consensual belief of the employees is referred to as the service climate (Hong et al., 2013) and it is usually specific in focus, descriptive in assessment, and collective/aggregate in the level of analysis (Bowen & Schneider, 2013).
Previous researches states various relationships between perceptions of service climate and employees’ job satisfaction, superior service performance, and employee attitudes and behaviours which was also supported by a study of Lenka et al. (2010). In a positive organizational service climate employees were happy with the climate of service and were more committed towards their organization’s service practices and felt more connected towards the organizational values. Similarly, in recent study made by Hong et al. (2013) found that the presence of a strong service climate within an organization can influenced employee behaviour
8 in great extend in the sense that employee are more committed towards responding to customers’ needs and preferences by engaging in organizational citizenship behaviour (OCB) more often.
As far as Organizational Citizenship Behaviour is concerned, it is defined as “behaviour that is discretionary, not directly or explicitly recognized by the formal reward system and that in the aggregate promotes the effective functioning of the organization” (Organ, 1988:4). This means that without any direct formal reward system organization can also improve their effectiveness overall. The element of OCB that increase the performance includes the elements which add social capital, helping or altruistic elements, elements resulting with time savings or problem solving, and other elements which provide socio-emotional support by boosting morale or developing a nurturing culture. Even more, highly engaged workers in OCB may improve managers’ efficiency by allowing them to devote a greater amount of time to long-range planning matters. Thus, it is proves that from positive OCB both, managers and employees can get benefits (Turnipseed and Rassuli, 2005).
Many service industries emphasize on Customer Relationship Management (CRM) since the customer experience plays an increasingly significant role in determining the success of any offering. A study made by P. Asubonteng,et. ,al (2007) reveals that customer experience is a set of interactions between a customer and a service/product, a company, or part of its organization, which provoke a reaction where such experience is strictly personal and implies the customer’s involvement at different levels (rational, emotional, physical and spiritual). As there is increased in the number of contact points between a company and its customers, firm starts monitoring many experiences that originate from those contact points (Chiara G., 2007).
1.2 Problem discussion
A closer inspection of literature reveals that the attributes related to strength of a service climate and the role that employees play to create a strong climate for service in the organization was positively associated with the store’s service climate. For instance, leadership qualities of employees play a vital role in order to create a strong service climate. Such leadership qualities are intellectual stimulation, charisma, inspirational motivation and so on (Schneider et al. 2005;
Salvaggio et al. 2007; Liao and Chuang, 2007). Hong et al. (2013) found that service oriented
9 leadership had stronger relationships with service climate than the usual generic forms of leadership. Another area of research has also focused on the engagement of employees and their effect on the creation of a service climate. Some writers (Salanova, Agut, and Peiro, 2005) proposed that employee engagement was an important factor which acted as a foundation for the creation of a service climate. The important finding from this study suggested that the level of employee engagement in creating a service climate was a detrimental factor which affected and determined the degree of customer experiences as being favourable or unfavourable.
Similarly, the strength of a climate was determined by the level of variance in the employee perception of the employees about the service climate within that organization. In broad sense, the climate was considered as being strong if there existed a low variance in the employee perception of the climate attributes and vice-versa. This study also concluded that climate strength acted as a moderator between the climate level of the organization and the customer experiences (Schneider, Salvaggio, and Subirats 2002).
In a recent study conducted by Bowen & Schneider (2013), the authors examined a service climate framework where service climates were linked to customer experiences via employees’
service oriented behaviours such as in-role behaviour and customer focused OCBs as mediators that yielded customer experiences. This proposition was also proposed earlier by Schneider et al. (2005) in their study which related service climate significantly to customer experiences through customer focused OCBs. It should be understood that through customer oriented service behaviours of employees, customer experiences are mediated. Service climate in itself cannot yield customer experiences alone (Chuang and Liao, 2010). Several studies have revealed important linkages that exists between service climate and various aspects of customer experiences such as studies focusing on the customer reports of service quality (Schneider and Bowen, 1985), some focusing directly on customer satisfaction (Schneider et al. 1996), and other on customer loyalty (Salanova, Agut, and Peiro 2005). Other studies have also been conducted which shows relationships between service quality, customer satisfaction, and customer loyalty simultaneously with service climate (Liao and Chuang (2004). From the extent of all these studies, it can be concluded that service climate of any service organization significantly relates to the customer experiences in a direct or indirect way.
There have been done many research on service climates to customer experiences but it has not been investigate the participation of customers in creation of strong and positive service climate in the firm. The service-dominant logic (SDL) argues that customers not only helping to co-
10 produce the service but also play a significant role as being a co-creator of value during the service delivery process (Vargo and Lusch, 2004). In last three decades, we saw different changing role of customers during the service delivery process. To be specific, customers were considered as ‘partial employees’ of the organization during the service delivery process were only regarded as being clients for firms (Mills and Morris 1986). After that customers were regarded as being an important ‘human resource’ in service organizations (Bowen 1986). At the last, many recent studies shows customers as being ‘resource integrators’ (Hibbert et al.
2012). At this stage, customers obtain value by themselves by integrating their own resources and other resources of the organizations and are involved in the co-creation of value (Bowen &
Schneider, 2013). However, it must be pointed out that there is little attention has been made to understand the role of customers in successfully co-creating a service climate and understanding how customers tend to react to the service climate of an organization.
Previous experience of customers effect the service climate strength that means in order to understand the role of customers in the overall co-creation of service climates, it is necessary to understand this behavior of customers in detail. Since customers and employees communicated through social interaction during the actual service delivery where the organization as a social context. Similarly, managers of firm can take advantage by focusing on the factors that could lead customers to help firm create good working climate inside organizations after understanding the role of customers in creation of service climate.
This gap has also been proposed by Bowen and Schneider (2013:12) in their recent article, that is, to understand the interplay of the co-creation of value with service climate creation and the role that customers play in each part of this process. Specifically, for scholar and researchers who wish to further research on this particular topic then this study can serves a bridge in different perspective into the creation of service climate and the role of customers. It is important to know the fact that customers being a very influential actor in the service climate creation process which has not been researched before.
This thesis paper mainly seeks to broaden the understanding of the process of service climate creation and the role of customers in co-creating a service climate inside an organization where co-creation of value takes place. It seems reasonable to assume that, within the service industry hotel services is one of the most service provider firm which are used by people from almost every background. By this fact, the author chose the hotel setting as the empirical context for
11 his research. The present study was conducted only within the hotel industry context in Oslo city of Norway.
We should acknowledge the fact that the author is mostly concerned with international guests, thus, author consider customers as an international guest. That means that author more likely highlighted the interaction between employees and international guest during direct interaction.
It is obvious that all encounters are not pleasant experiences for both customers and employees during direct interaction because sometimes employees might not attend to customers with joy and some customers might be rude to employees. For instance, customers have to spend time in hotel at least for a while before getting them informed and are served (time spending with receptionist for general inquiry). This lead to the fact that close interpersonal interactions between employees and customers more likely possible, as well as between customers.
Schneider and White, (2004) states that hotel industry as high-contact services as the service provided there is produced in the presence of the customer and more importantly, interactions between the customers take place where at the same time the other parts of the hotel offerings are also of importance (Walter et al. 2010). For instance, customers are also influenced by other factors such as the layout of the hotel (lobby area, coffee machine, and sofa etc.), the food and beverages, and lighting and interior design of rooms etc.
Regarding about thesis topic (main subject matter such as service quality, service climate, service deliver, customer involvement, word of mouth etc.), it comes under Service Marketing.
As it was also argued by a number of authors (Lytle, Hom, and Mokwa 1998; Schneider et al., 2009 cited in Auh, Menguc, Fisher, & Haddad), “Service climate has been a pivotal construct from a practical and theoretical perspective in the services marketing and management literatures (2011:427).” Author had select International Business and Marketing as a main course (22.5 credit). That means author supposed to write thesis on the Marketing field which includes those terms. In order to lead his thesis towards main course author will also include international customers/guest rather than national customers as suggested by Supervisor. Since author had done MOPP where he acquired the theoretical knowledge of cultural difference during the study of International Business and Marketing. Author try to include these theory concepts into theoretical framework that usually occur between international guest and hotel’s employees. To be more specific, different relevant factors related to cross-cultural communication, communication in High context and Low context, Geert Hofstede’s five cultural dimension, and so on. This leads to new challenges for hotel industries, where laws
12 have to face cultural phenomenon’s that differs from country to country. Communication gets harder where time management, body and Non-verbal language, and other factors plays a huge role and thus the cultural diversity becomes significant. Therefore, hotel companies have to take notice of these cultural differences to create good service climate. Employee attitudes towards the international guests are often linked to the satisfaction level of the employee from his/her work environment. In this study I decided to do research on hotel which is an empirical context for this study as it provides good opportunity to study the customers’ participation and their role in the co-creation of the service climate.
1.3 Purpose of the Study
Based on the problem background and research gap, author come up with the main purpose of the study, that is to further understand the role of customers in the creation of a successful service climate inside a hotel industries where there exists direct interaction between customers and employees in the process of service delivery. In this research paper, this co-creation takes place in hotel firm as consider a social environment. In order to understand how customers (international) react to and help co-create service climates in hotel organizations; it can be done by observing the different customer behaviours and experiences and relate it with the behaviours and perceptions of the employees.
1.4 Research Question
The research question developed for this paper is:
How can customers facilitate to co-create service climates in case of hotel firms as being the social context where co-creation of services occur?
1.5 Limitation
This study is limited to Oslo city because the author is living in this city and it is easy for the author to collect data and information from the respondents in Oslo. The amount of experience of the employee respondents also delimits. The study as the experience of employees is only between 1-3 years of work experience. Therefore, developing attitudes and loyalty of those employees towards their work organization could also account for the positive work climate
13 inside hotels which acts as delimitation for study. Another limitation is that during direct interaction manager actor is not taken into account. However in this study, the interaction between employees and customers and within customers are take into consideration. The interactions between customers and manager of hotel were not considered.
1.6 Structure of the Thesis
A detailed analysis of all the relevant subject matters concerning research question and purpose are included in this research study. Figure 1.1 illustrates the structure of this report.
Figure 1.1 Illustrates the structure of this report
Chapter One: This chapter describes the main concepts and the context of the study including chosen topic and research purposes. By identifying the research gap within the area and
Chapter Two: Describe the chosen theories and literature that are relevant for this study.
Develop a model based on those existing theories in order to establish conceptual framework and also to develop an interview guide for the empirical findings.
Chapter Three: This chapter presents the scientific stance of the study that discuss methodological considerations related to the research topic. Similarly, how the quality criteria
Problematization (Chapter One)
Theortical Framwork (Chapter Two)
Research Design and Methodology
(Chapter Three)
Emperical data (Chapter Four) Discussion and
Analysis (Chapter Five)
Conclusion (Chapter Six)
14 of research and ethical consideration are taken to ensure the credibility of this study is also presented.
Chapter Four: This chapter consists of practical methodology issues which provide the reader with the findings from the interviews. This chapter come up with the results from the empirical findings before moving into the discussion and analysis.
Chapter Five: Mainly analyze the empirical findings with the theory from the literature review in order to get the pre-conclusion (help to answer the research question more into detail thorough analysis of the interview results).
Chapter Six: This chapter will answer the research question and research purposes on the basis of discussion and analysis part. Depending on findings, contribution of the study and recommendation for the further studies will be presented.
15 2 Theoretical Framework and a Literature Review
This chapter provides related literatures and theories regarding service climates, service co- creation, customer experiences, and customer value co-creation behaviour, and effects of such customer behaviours, cultural distance. These theoretical concepts have been used as a basis to develop the research question in the previous chapter. Finally, the section portrays the summery of the theories in related to the research gap.
2.1. Service Quality
A service is a process consisting of a series of intangible activities (more or less) while interactions take place between the customer and service employees or systems of the service provider (Grönroos, 2000. The main purpose is to provide a solutions to customer problems through the result of interactions between customer and service provider. In a service context, such relationship can be used as a basis for marketing (Grönroos, 2000). It is very crucial to manage customers for long-term profit of the firm which can be done by offering what the customers’ need and want. However, it is important to notice that the quality of a service is subjectively perceived by customers during the interactions within a firm (Grönroos, 2000).
Based on integrating previous studies and conceptual works, Grönroos (2000) summarized seven criteria of good perceived service quality as: (1) professionalism and skills; (2) employees’ attitudes and behaviour; (3) accessibility and flexibility; (4) reliability and trustworthiness; (5) service recovery; (6) serviscape; and (7) reputation and credibility.
It has been proved by many researches that a service quality perceived by customers directly influence the customers’ satisfaction and their trust in the service. That means customers can be satisfied when a firm provides better services than their pre-purchase expectations. At the same time, customer trusts also emerge when customers perceive positive service quality from a firm, and believe that the service firm would bring preferable outcomes for them. In service industry such as hotel industries (where direct interaction occur with customer), service quality is an important indicator to assess a service provider’s performance. Thus, we can say that offering a high quality service is almost a succeed in competitive service markets as it creates customers trust and satisfaction as a result firms can build a long-term relationship with customers.
16 2.2. Service climate
Service climate can be referred to as an experience that employees gather inside the organization which is assisted by the policies and practices that shape the behaviours of the employees which reflect the atmosphere and work climate of the organization. In other words, service climate of an organization determined the behaviours of employees through the policies and practices of that organization. Similarly, experiences of the employees also reflected the service climate such as what is going on around them inside the organization which finally assists to shapes the general tone, atmosphere and the work climate of an organization (Schneider et al. 2000). Developing such practices and policies helps to motivate employees as a result they will uplift their performance by delivering excellence service (Mechinda and Patterson, 2011). It has been found by many researchers that the organization where employees feel their organizations’ practices are not keen to focus on customer oriented services then it directly affects the attitudes and behaviours of employees and customers as well. As a result, employees have a less positive experiences during service encounters (Bendapudi and Bendapudi, 2005). However, for providing excellent service, organization basically needs to focus in two areas that is, concern for its employees and concern for its customers which is essential for creating an environment of positive service climate within the organization.
Focusing and concerning on employees needs leads to serving customers in a better way (Mechinda and Patterson 2011).
Service climate of the organization determines how the employees behave towards the customer. Also, the employees consisting service centric personality traits develop intrinsic motivation because of which customers are served with better quality service (Auh, Menguc, Fisher, & Haddad, 2011). An organization should always look for building a positive service climate which would be beneficial to the firm customers as well as employees in delivering excellent service and customer satisfaction. Hence, the internal management philosophy of the organization is translated into effective and improved organizational performance with the help of strong service climate (Schneider et al., 2005; Schneider, White, & Paul, 1998,).
Furthermore, a service climate gets effected by general human resource practices and service oriented human resource practices. The later one has profound effect on service climate as it has concern for both employees and customers (Chuang & Liao, 2010). In the other hand, general HR practice is related as a gist of the service climate just because they enhance the overall employee performance. The employees of the organization adopts human resource practices to know certain behaviours and action that is acceptable to the organization whereas
17 not being able to communicate organization’s strategic focus and service theme to the employees could lead to demotivate them (Hong et al., 2013).
2.3 Service Oriented Organizational Citizenship Behaviour (OCB)
In its true sense the definition of customer orientation as per Saxe and Weitz (1982) cited in Mechinda and Patterson, “willingness of individual service providers (in this case employees) to customize their service delivery according to the customer’s situation (e.g. needs, preferences, problems etc. (2011:6).” It shows that the customers are variant in nature and sometimes they can be rude, impolite, disrespectful and aggressive with some unreasonable demand. This reveals that the service industry is very unpredictable where the slightest of ignorance or misjudgement by the service providers could lead to disastrous situations.
Therefore, firms should promote practices that deliver excellent services to the employees and they should be valued and rewarded for whatever they have done (Chi et al., 2013).
From above statement we come to know that involvement of employees is necessary to retrieve suggestion of their ideas that will provide opportunities to respond to changing demands of customers. Thus, a strong and positive service climate can be created. (Batt, 2002; Liao and Chuang, 2004; Ro and Chen, 2011,). For instance, the importance of service-oriented OCBs adopted by frontline service employees in a hotel is of utmost importance since they have direct contact while delivering the customers which impacts in repetition of purchase behaviour of the customer as per study conducted by Ma et.al 2013. It must have been noted that there exist a strong relation between employee attitude, customer satisfaction and overall firm performance.
Creation of positive service climate through appropriate service behaviours and customer oriented OCB’s leads to excellent service to customers. Therefore, customers feel the value of quality of service and are likely to spend more time inside the firm (Tsai & Huang, 2002,).
Thus, not only firms and the employees are essential in service creation process but also customers in fact play a significant role during the value creation of service delivery process.
(Bowen, Siehl and Schneider 1989).
2.4 Value Co creation in service logic
Role of customers in service delivery process is understandable when the concept of value and value creation is clear. In service marketing value and value creation are an elusive concept which came to light when the service-dominant (S-D) was published. Value is co-created by producers and customers but the view shifted the traditional focus of value-in-exchange to value-in-use meaning of value, where value was co-created through the interaction of resources
18 between customers and the firm or firm’s resources. Whereas value creation is co-created with the combined effort of customers employees and the firm (Vargo et al. 2008). Value creation is simply a process through which the users tend to excel in using goods and service to increase their wellbeing. Also, the perception of customers’ experience from using the resources is considered in value in use concept. (Gronroos 2011). The viewpoint of customer vary to that of the firm regarding what service actually mean to them. Therefore, from the viewpoint of customer service means being able to use the resources in a value creating way (Gronroos, 2008). Likewise, from the viewpoint of firm service means to support and provide customers’
with resources and interactive processes so that their customers are able to create value to themselves (Gronroos 2011). When firms provide such offering to customers then customers choose appropriate one that would provide them with maximum utility (Dickinson and Corks, 2005).
2.5 Social Construction Approach
In traditional goods dominant logic firm was considered as the sole creator of value but the service logic proposed by Vargo and Lusch (2004) says that customers are the main focus of value creation process. In addition, Service Dominant logic reveals that value was co-created with customers who were the centre of value creation process. It also states that both customers and firm are the resource integrators that is embedded in an organization (Vargo and Lusch, 2006). Vargo and Lusch says that as per service dominant logic value is co-created with customers in two ways “value-in-use” and “value-in-context” (2004:9).” In both cases social context was not given preference where the value creation takes place. However, this aspect was later considered by recent study conducted by Edvardsson et.al 2011) as to how value creation takes place and the different factors that took place during the process. Furthermore, the author developed a concept that value is socially constructed process which positioned customer in a social context inter subjective actor and a resource integrator rather than the individual actor. Also, the study pointed out that the roles position and customer interaction has a major impact while developing knowledge skills and their ability to use goods and services to co create value (Edvardsson et.al 2011). Meanwhile , it is necessary to understand that not only collective social forces has important role during service exchange and value creation but also, the individual needs, preference, habits and values of actors are playing a significant role in value creation process (Edvardsson et al.2011).
19 2.6 Interaction Concept
Interaction take place when the presence of two parties occur whose reciprocal actions effect each other (Gronroos 2011). The firm that interaction takes place in a service context is service encounter which means “a period of time when the buyer and seller meet and engage in behaviours and activities” (Wong & Sohal, 2003:11). Service encounter has a direct impact on overall attitudes of customers, employees and the firm and thus it is considered as a psychological phenomenon (Solomon et al., 1985). An integrated process termed as ‘dialogical process’ is a process that has been created by merging two processes of customer and the firm according to Ballantyne and Varey (2006). The reason behind these interaction between firm and customer not taking place in a parallel process rather merged together is to have opportunities to influence each other’s processes. Thereafter, being engage to each other in a coordinated manner they aspire to learn and get influence from each other (Gronroos 2011).
For an example, the interaction between employees and customer is considered as an important aspect in a hotel where the perception of employees meets with customers (Schneider and Bowen, 1995). Being value creators themselves customers are responsible in value creating.
However, firms act as a co-creator while participating in value creation process of customer and make use of opportunities during direct interactions. Whereas, firms act as facilitator in case of non-availability of direct interaction eventually making value creation impossible (Gronroos 2011).
Moreover, employees should learn certain etiquette to deal and manage customer interaction because all direct interaction might not be as favourable as it is supposed to be. Only if the frontline employees are aware of the needs and wants of customers then more value will be perceived by customers in service encounter or else the outcome will be negative. Notably, firm outstand as a co-creator of value with their customers who actually create value by providing resources out of which customer create value if only direct interaction between service provider and customer exist (Gronroos 2011). Customer experience depends upon service encounters as well as direct interaction between customer and the employees of the firm. Therefore, value creation is based upon experience that the customer derives while engaging in direct service encounters (Gronroos, 2011).
2.7 Drivers of customer experiences
In the present era, customers are not static to the choices they have for goods and services that means they are no longer submissive in their buying behaviour. That is the main reason why
20 management firms should understand regarding the preferences of customers in order to sustain in the competitive market. Similarly, firm need to be sensitive about what value that adds to customer since they observe from goods and services provided by the firm (Walter et al. 2010).
Customer experience defined by Sundbo and Hagedorn-Rasmussens (2008) is “a mental journey that leaves the customer with memories of having performed something special, having learned something or just having fun.” This definition emphasize that customer experience is all about storing experiences and later on referring it in value creation process as knowledge or competencies. Further, customer experience gets affect due to certain factors. Those factors were determined by Walter, Edvardsson and Ostrom (2010) and pointed out three important frequent drivers which were social interactions, the core service, and the physical hotel environment (Walter et al. 2010). Social interactions are indispensable part in overall experience process and act as a medium through which customer shape its preferences (Gupta and Vajic, 2000). It can take place between customer and employees, between employees and between customers. Similarly, a study by Walter .et.al.(2010) declared that the customer value as “an interactive relativistic preference experience” and that the customer experience is the outcome of interaction with other people (Walter et al. 2010:13). Therefore, social interaction is an important factor for determining favourable and unfavourable. Likewise, the rest of the two drivers are also seen as the influential drivers for customer experience. Next, the core service that is, the quality of the food and service level of the firm played an important role in customer experience (Walter et al. 2010). Finally physical environment, the third driver for customer experience is about determining the key factors such as exterior, interior, layout and the overall service-scape in order to evoke positive and negative experiences from the guest (Walter et al. 2010).
2.8 Customer value co creation behaviour
It has been already noted from SD logic that customers are the active value co-creators themselves (Vargo and Lusch, 2004). Now, behavioural aspect of customers in value co creation must also be understood. On the basis of past research, there are two types of customer value co creation behaviour has been mediated namely; customer participation behaviour and customer citizenship behaviour (Bove et al., 2008; Groth, 2005; Yi & Gong, 2008; Yi, Nataraajan & Gong, 2011). Customer participation behaviour is defined as the “expected and required behaviours which are necessary for the successful production and delivery of the service”, whereas Groth defined customer citizenship behaviour as “voluntary and discretionary
21 behaviours that are not required for the successful production and delivery of the service but that, in the aggregate, help the service organization overall (2005:13).”
In contrast, the engrossment of customers in the value creation process refers to customer participation (Yi et al., 2011). On the other hand, when the customer engagement is not mandatory and when their performance is based upon sole canniness it is referred to as customer citizenship behaviour. (Bettencourt, 1997; Groth, 2005). According to the study of Yi and Gong (2013) customer value co creation behaviour was seen as a multi-dimensional construct and further divided the two type of customer value co creation behaviour into four dimensions each .Dimensions of customer participation was information seeking, information sharing, responsible behaviour, and personal interaction. Whereas, customer citizenship behaviour consisted of four dimensions: feedback, advocacy, helping, and tolerance was the dimensions of customer citizenship behaviour. (Yi and Gong, 2013).
The service marketing realized customers as an indispensable part and the important human resources of the firm’s environment that means customer behaviour influences the performance of the firm. Therefore, interaction of the customers with firm and its frontline employees is important as service delivery is greatly reliant to it and it determines the efficiency of the firm (Yi et al., 2010). According to customers contact frequency, identification of high-contact and low-contact subunits in the firm can improve operational efficiency by effectively deploying its resources (Bowen, 1986; Chase, 1981). Furthermore, when firms deploy their frontline employees (FSEs) then customers are prioritized more and FSEs will have more time to engage in social interaction with the customers. As a result more rewarding and positive interaction can be manifested. This lead to understanding of mutual needs between the employees and the customer (Homburg et al., 2007). Employees attitudes can change and can respond with positive behaviour with the customer due to the customer citizenship behaviour (Cropanzano and Mitchell, 2005). Positive attitude makes employees more responsible towards their work with higher satisfaction and commitment towards the firm (Tepper et al., 2004). On the other hand, customer citizenship behaviour like providing feedbacks aids FSEs with valuable knowledge which can be shared among co-workers and all over the firm (Yi et. 2010).
2.8.1 Dimensions of customer participation behaviour
The dimensions of behaviours that customer carryout while participating in service delivery process are discussed below:
22 Information seeking: During a service encounter customers as a value co-creator are require to be conscious about how they are supposed to perform their task so that their clarification regarding service requirements are gratified (Kellogg, youngdahl, & Bowen, 1997). It is essential to seek information by the customer as it reduces uncertainty allowing better understanding of their co-creation environments (Yi and Gong, 2013).
Information sharing: There must be clear information flow between employees and customers so that the service provided by the employees meet customer’s particular needs (Ennew & Bink, 1999).
Responsible behaviour: Only if the customers recognize their duties and responsibilities of being partial employees of that firm value co-creation can be a success between employees and customer (Yi and Gong, 2013). Whereas, during service encounters value co-creation might be low if customers are not aware of their responsible behaviour. Therefore, customers need to be observant a cooperative to rules and policies of the firm and accept directions from the employees (Bettencourt, 1997).
Personal interaction: Interpersonal relation that arise between customers a employees such as courtesy, friendliness, and respect is considered as an persons interaction which is an important dimension of customer participation behaviour (Ennew & Bink, 1999). Within such positive pleasant and congenial environment customers are likely to indulge in value creation.
2.8.2 Dimensions of customer citizenship behaviour
The four dimensions of customer citizenship behaviour are discussed as under.
Feedback: The solicited and unsolicited information that employees receive from customers are feedback as per Groth, Mertens, & Murphy (2004). Ultimately, this information assist the employees and the firm in order to improve their process of service creation in the long run (cited in Yi & Gong, 2013).
Advocacy: Advocacy refers to the recommendation of the firm or employee to other people (Groth et al., 2004). While in the context of value co-creation it determines allegiance to the firm and interest of the firm which is also promoted along with increased customer base (Bettencourt, 1997; Groth al., 2004).
Helping: In service co-creation process helping can be simply understood as supporting other customers who are helpless and might need help (Groth al., 2004). Similarly, in order to overcome difficulties some customers evoke their own difficulties experiences and exhibit a bit feeling of empathy to other customers by helping them (Rosenbaum and Massiah, 2007).
23 Tolerance: It simply refers to the level of patience that customers have in case of delays and equipment shortage during service delivery (Lengnick Hall et al., 2000). This means that the level of tolerance of the customers is the effect of customer behaviours in co-creation service delivery.
2.8.3 Customer behaviours’ effect in co-created service delivery
As the types of customer behaviours and its dimensions have been clarified which show how these behaviours affects other actors indulged in the co-creation of service delivery. Customers are always looking towards the satisfaction and fulfilment of their personal needs by participating in service delivery process and actively co-creating value with service providers (Dong et al., 2008). The effects of customer participation during the service delivery can be understood by explore customer’s psychological responses and their impact on the satisfaction level of the customers. Furthermore, the study by Meuter et al., (2005) found that when self- service systems and technologies are preferred over interpersonal services, customers get delighted with their accomplishments and self-efficacy. It reveals that customers create more value through self-participation in the service delivery process. In the similar way, the study of Zeithaml and Bitner (2003) showed that, with the increase in level of participation customers are likely to be more committed as well as motivated to co-create service resulting in higher perceived service quality.
2.9 A Business Culture
A business culture influences the way employees behave within an organization and it emerges from a country’s culture. Due to the cultural differences companies have to realize that it is important to understand both the different cultures of their markets and the various situations that may occur (Varner & Beamer, 2011). This supports preventing misunderstandings and establishing good relationships to customers and employees. Varner and Beamer (2011) develop different questions a manager should be able to answer before facing another country's culture. The questions contain the five different categories thinking and knowing, doing and achieving, the big picture, the self and the social organization (Varner & Beamer, 2011). This analysis, if carried out with accuracy, supports the understanding of other cultures, their business cultures and of the one of an individual’s cultural identity, which can result in an advantageous business expansion.
24 Company must be aware of the cultural differences concerning values and norms which we otherwise might take for granted. We know that culture is coherent, learned and with shared values on which we base our lives. But these values can be differing between different countries and cultures and when they meet, misunderstanding and problems can occur. In addition to this, the origin of the problems lies in our preconceived intentions and ignorance of other cultures.
Culture and cultural distinctions are at the heart of international marketing Curry (1999 cited in Heerden & Barter, 2008). Culture is an important factor in the international environment to achieve success in international marketing strategies, thus culture should be well understood (Heerden & Barter, 2008). According to Jacobsen and Thorsvik (2009) the success of a company can be explained by studying an organization’s culture. Earlier studies on different organizational cultures show that strong cultures within a company bring the employees together and create a common experience of fellowship and community. Common goals, values and community among the people play a crucial role in how successful an organization might be.
2.9.1 Learning about cultures
The first step managers need to establish in members’ mind is that each one has to learn and to understand the characteristics, the customs, the values and expectations of the cultures of other members of the team. Indeed, “understanding others’ cultures is important to success” (Varner
& Beamer, 2005). The more the members will know about others cultures, the easier it will be for them to communicate between them. Moreover, Varner & Beamer says that “all interactions with other cultures are more likely to succeed when you know something about the culture’s differences (2005:334).”
Thus, managers encourage members of the team to be curious about the difference because they will be motivated to work with people from different horizon and it will help members to create connections between them and, like this, they will create a better relationship. They can use for this, the Hofstede’s research (Varner & Beamer, 2005) on cultural dimensions: individualism versus collectivism, power distance, uncertainty avoidance versus uncertainty-tolerance, and masculinity versus felinity (and long term orientation).
Understanding other cultures is not the only thing team’s members have to do. They also have to know their own culture and understand it. Indeed, as Varner & Beamer describe that
25
“researchers have shown that having a good understanding of one’s own culture’s values, attitudes, and behaviours is the best foundation for developing the ability to understand the communication behaviour of people from other cultures (2005:334).”
To conclude we can say that these two activities work together because “the more cultures you understand, the more you’ll know your own” (Varner & Beamer, 2005:170). Thus, by studying other cultures the team’s members also work on their own.
2.9.3 Trompenaars seven dimensions of culture
Draw up a new business strategy by considering both the differences and similarities across countries and those among individual consumers and services/products are important. Most importantly! There are cross-cultural differences with respect to attitude toward same service/product in different country. Therefore, it is important that Trompenaars’s seven dimensions of culture taken into account when understanding cross-cultural communication.
Fons Trompenaars is an author from Holland who is working in the field of cross-cultural communication. In Bickerstaffe’s (2002) interview with Fons Tropenaars, Trompenaars explain the seven different factors that need to be explored.
1) Universalism versus Particularism: It describes how the company works in terms of flexibility or if their work follows standardizes rules.
2) Individualism compared to communitarianism: It explains what the organization is focused on, group or individual cohesiveness.
3) Connected to this is the Sequential: Synchronic factor and here one can see whether the employees work simultaneously with different things or if they do one thing at a time.
4) Neutral – Affective dimension: It show how much the employees and managers tend to show emotion and put their feeling up for display is explained with the
5) Specific or Diffuse dimension: how personally engaged an employee is in their job can differ,
6) Achievement Vs Ascription: Different cultures also look at different things when evaluating a person; one could look at a person’s status based on their merits but someone else could look at different factors such as age and background.
7) Internal Vs External. The last of his dimensions concerns the motivation of the
26 employees that can come from either inside a person or from the outside.
All of these factors can be used to make managers understand and manage their employees in a better way and to understand other cultures (Bickerstaffe, 2002).
2.9.4 Geert Hofstede’s five cultural dimensions
The theory of Hofstede identified five cultural dimensions which can be used to acquire a wide and quite detailed view of a foreign culture: Geert Hofstede’s model focuses on studying national cultures (Varner & Beamer, 2011). The model of Cultural Dimension allows the understanding of cultural differences between countries. Thus business companies can adapt to or interact with different cultures. In order to establish successful business interactions it is critical to understand both your own company’s culture and the one of your customer's company.
A company’s business culture is made and can be changed by its leading managers. But it is not an easy way to do so. A manager should analyze a country by using Hofstede’s Cultural Dimensions before dealing with international customers. Managers can base their strategy on this model and try to establish a link between the management orientation of their international business to the cultural identity of the countries that determine the company’s market (Hofstede and Waisfisz, 2011). To support this understanding Hofstede’s model analyses the five cultural dimensions which are given below (de Mooij & Hofstede, 2010);
1) Power distance: It describes an index that measures the distance and distribution of power between different management levels in an organization, institution or society in connection to the actors’ acceptance regarding this distribution. The power distance can be more or less distinctive in a society and can be explained by various factors such as a country’s history or religion. Usually countries with a low level of power distance are affected by horizontal societies which means that such a society is “less authoritarian and hierarchical” (Varner and Beamer, 2011)
2) Individualism/collectivism: It defines the degree of an individual’s integration into a group and its participation in the decision making process. A collectivist society and its companies can be characterized by group work, active participation and close communication between the different actors. In such a society “the individual has responsibilities to the group” (Varner &
27 Beamer, 2011:143). Contrary to that, employees work each in their own way in an individualistic society. Group work is not shaped by cohesion and an individual’s capabilities and skills are the main characteristics of an organization
3) Masculinity/femininity: According to Hofstede (1980) these attributes do not exclude each other necessarily. They often emerge together. A masculine society is characterized by authority, its degree of assertiveness and competitiveness, its development of a high system of education and its professional careers. However feminine societies are rather formed by solidarity, close personal relationships, nurturing and harmony (De Mooij and Hofstede, 2010).
4) Uncertainty avoidance: It provides information about the degree to which people can tolerate ambiguous situations (Varner and Beamer, 2011). A high degree of uncertainty avoidance implicates the calculation and avoidance of risk in business settings. Innovations aren’t common in such companies. Contrary to that a low level of uncertainty avoidance encourages risk taking and innovations. Such a kind of society is more flexible and open to new challenges
5) Long-/short-term orientation: A country that orientates at the long term is based on persistence, future and forecast of goals and objectives. On the contrary the short term orientation focuses stronger on the past, the present, respect regarding tradition and former social obligations (De Mooij and Hofstede, 2010).
This Hofstede's research gives us insights into other cultures so that we can be more effective when interacting with people in other countries.
2.9.5 Cultural intelligence And Transactional culture
According to Varner & Beamer, “We know that people are not alike in how well they adapt to another culture. Even those who show sensitivity and delicacy when interacting with people in their own culture may fail to show the same ability to adapt in a new culture (2005:23). ” Thus, the second thing managers need to think about is the cultural intelligence of members. Cultural intelligence is defined by Varner & Beamer as “the capability of an individual to learn and understand another culture and then act accordingly” (2005:23). This refers to a person’s capability to adapt in a successful way to a new cultural setting. Cultural intelligence has three main components: cognition or knowledge (first part), motivation, and application or
28 behaviour. These components are the necessary components members need to have in order to understand another culture and prevent mistakes.
When cognition is mentioned as a component in cultural intelligence this means the knowledge about the culture and how things are done in the culture. The second element that also is really important for a person’s capability to adapt to a new culture is an individual’s motivation to adapt successfully. At last but equally important the behaviours which means the appropriate actions according to the new culture also affect the cultural intelligence. So to conclude, Cultural intelligent consists of the knowledge about the new culture, the desire to adapt and proper behaviour. A high cultural intelligent will help business people to reach their goals in foreign cultures (Varner. Beamer, 2011).
After that the member of the team have learned the different cultures (the others and their own) and have demonstrated cultural intelligence, the last thing managers need to think before they formalize the team is to create a transactional culture. “A transactional culture exists when interactants respond to cultural cues and modify their own behaviour, creating or co-creating a new, temporary culture” (Varner & Beamer, 2005:16). If team’s members do this they will act as a whole, they will try together to achieve their goal and being efficient. They will act as a real team with a real culture where all the members are satisfied.
2.9.6 Communication in High context and Low context cultures
Kim et al. states that Edward Hall’s theory on low-context vs. high context cultures is useful when trying to understand communication between people of different cultures. We agree on this and think it is very useful in our case of eastern and western cultures since eastern cultures are considered to be of high context and western cultures are considered to be of low context (Kim, Pan & Heung, 1998). The meaning of Hall’s theory is that high context cultures use the context to convey a message, while low context cultures uses explicit words with precise meaning to communicate. Hall placed countries somewhere on the continuum between high and low context. He identified Japan as being of high context and US as being on the low context side (Varner. Beamer, 2011).
Kim et al’s article provides a more in depth analysis of Hall’s theory applied to eastern and western cultures. High context vs. low context cultures are examined through the dimensions:
29 social orientation, commitment, responsibility, confrontation, communication and dealing with new situations (Kim et al., 1998). Western cultures were found to have more fragile relationships between each other and therefore a weak social orientation. For example family membership is sometimes considered to be optional (Varner & Beamer, 2011). Eastern cultures with high context have strong involvement with family, friends, colleagues and their community, which reflects their strong social orientation (Kim et al., 1998). In western, low- context, cultures, one looks to the circumstances when deciding to commit to a promise. In high-context cultures on the other hand a person’s word is a promise and expected to be followed through. Commitment is high to complete actions chains. As high-context cultures are very relationship-oriented, a promise or commitment is usually the beginning of a lifelong relationship (Kim et al., 1998).
Cultures with high context avoid confrontation and seek harmony. An example of this is the importance of the concept of saving face in Japan (Varner &Beamer, 2011). In western low context cultures criticism on the other hand is more direct and the confrontation focuses on solving conflicts compared to high context cultures avoiding of conflicts. In eastern high context cultures messages has to be put into the right context to be able to be understood. An example of this is in Chinese written business letters, which start with some reference to the relationship between the sender and the receiver or some background to the reason for communicating (Varner & Beamer, 2011). In low context cultures communication is made through explicit code and less emphasis is put on the background or the relationship (Kim et al., 1998).
2.10 A Chapter Summary
As matter of fact, the service climate creation in an organization is a large topic comprising of various elements, thus it is difficult to summarize the topic in a few pages. However, I have tried to lay the foundations that make up the service climate in an organization by using different theories.
Firstly, we illustrated the importance of service and service climate for organization in order to develop a positive service climate. This brings the right attitude for employees to work and motivate to give a high quality services to the customers. Similarly, as the firm focus on HR practices (service orientation) then employees are more likely to be passionate about their work and seek to deliver quality services. Another discussion was the positive relationship between
